MSRB Proposes More T+1 Settlement Rule Changes

The MSRB proposed a rule change "to promote the completion of allocations, confirmations, and affirmations by the end of trade date for transactions in municipal securities between brokers, dealers and municipal securities dealers and their institutional customers." The MSRB proposal is intended to establish a core standard for same-day allocation, confirmation and affirmation for regular-way transactions.

The proposed amendments follow the adoption of prior changes to MSRB Rule G-12 ("Uniform Practice") and MSRB Rule G-15 ("Confirmation, Clearance, Settlement and Other Uniform Practice Requirements with Respect to Transactions with Customers") to define regular-way settlements for municipal securities transactions as occurring one business day (T+1) after the trade date so as to align with recent SEC rule amendments to shorten the settlement cycle.

The MSRB-proposed amendments would establish a new Section (k) "to require dealers effecting municipal securities transactions subject to the T+1 settlement cycle to either enter into written agreements as specified in the proposed rule change or establish, maintain, and enforce written policies and procedures reasonably designed to address certain objectives related to completing allocations, confirmations, and affirmations as soon as technologically practicable and no later than the end of trade date."

In the proposal, the MSRB noted, "Although Exchange Act Rule 15c6-2 ["Same-day allocation, confirmation, and affirmation"], as adopted, does not apply to municipal securities transactions, the MSRB believes that the same- day allocation, confirmation, and affirmation process for municipal securities transactions in the secondary market should be consistent with that for equity and corporate bond transactions."

The effective date for the amendments is June 1, 2023 and the compliance date is May 28, 2024, which is consistent with the implementation date for amended Exchange Act Rule 15c6-1 ("Settlement cycle").